TaxTMI 
TaxTMI 
TaxTMI 
2021 (4) TMI 1361
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....ase networking equipment from Cisco SI BV/third-party resellers. 2.1. For the year under consideration, assessee filed its return of income declaring 'nil' income on 29/11/2015 after setting off brought forward losses. The case was selected for scrutiny and relevant statutory notices were issued to the assessee. Subsequently, the assessee filed revised return of income on 28/03/2017 declaring 'nil' total income after setting off brought forward losses. The Ld.AO observed that assessee had international transaction of Rs.10 crore or more in earlier assessment year and the issue was pending in appeal. Accordingly, the relevant assessment year was referred to transfer pricing officer for computing the arm's length price as per provisions of section 92CA of the Act. 2.2. Upon receipt of reference, the Ld. TPO called for economic details of the international transaction entered into between assessee and its AE. The Ld. TPO on verification of the details filed by assessee, did not make any adjustment to the international transaction entered into by assessee. However, in relation to the specified domestic transaction pertaining to administration support services availed from the domesti....
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..... However the DRP following its order for assessment year 2011-12 to 2014-15, upheld disallowance of depreciation claimed by assessee on assets leased out under finance lease arrangement. The DRP also rejected the alternate plea of assessee to grant depreciation on the opening WDV of the block of assets leased out under finance lease arrangement. 2.7. The DRP further disallowed set off of brought forward depreciation loss by following its own order for assessment year 2009-10 to 2014-15. 2.8. In respect of the Transfer Pricing adjustment, the DRP excluded one comparable, being M/s Asian Business Conference Exhibitions Ltd. The DRP observed as under:- "The DRP on analyzing the group overview and TP documentation maintained, has concluded that Cisco Capital only assumes routine market risk associated with Interest and capital risk and does not bear market risk for product sales. Further the DRP has also stated that the FAR analysis of the Appellant and AEs indicate that marketing functions and market risks are borne by the manufacturing entity CSI BV and marketing function is not envisaged for Cisco Capital. The DRP has stated that all the intangibles developed from the market....
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....sment years, we also remand this issue back to the Ld.AO with similar direction. Accordingly these ground raised by assessee stands allowed for statistical purposes. 4. Ground No. 3 is raised against not allowing set off of brought forward depreciation loss. 4.1. The Ld.AR submitted that, in the return of income filed by assessee, it had claimed set off of brought forward depreciation of loss amounting to Rs.28,54,47,236/- pertaining to assessment year 2009-10 and Rs.83,52,86,117/- pertaining to assessment year 2013- 14, totalling to Rs.1,12,07,33,535/-. The Ld.AO while passing the draft assessment order denied the claim of assessee. The Ld.AO while passing final assessment order noted that that on completion of assessment for assessment year 2008-09, 2009-10 and 2013-14, the income has resulted in positive, and therefore no set-off of brought forward losses is available for assessee for the said years. 4.2. The Ld.AR submitted that, the Ld.AO has not given effect to the orders (hereinafter referred to as OGE) passed by coordinate bench of this Tribunal for assessment years 2008-09, 2009-10 and 2013-14. 4.3. The Ld.CIT.DR placed reliance on orders passed by authorities below.....
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....ey would consider the option to take loan financing/lease financing approach. It has been submitted that the customer may either choose to avail such services from a third-party financer or approach assessee to finance the equipment by way of loan/lease. 5.3. It has been submitted by the Ld.AR that the third-party customers are not obliged to avail such financing services from assessee exclusively, and it is the discretion of the customer to decide whether they want to avail lease/loan financing arrangement from assessee or other financers. 5.4. The Ld.AR vehemently submitted that assessee is an independent entity and acts in the capacity of an enterprise in the business of providing leasing and financing services to the third-party customers. It is also submitted that assessee bears all the entrepreneurial risk associated with its business and therefore responsible for all the functions integral to the leasing/financing business of Cisco. He submitted that since assessee do not have its own staff/employees, it avails services of Cisco India for administrative, marketing and sales support services like accounting, data processing, helping marketing and promotion on financial serv....
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.... purchase of equipment from the AE by assessee for financing arrangement is held to be at arms length by the Ld.TPO. It is also been submitted that the marketing and sales support services availed by assessee from Cisco India is integral to the main business of assessee and the same has to be considered as a closely linked transaction to the principle transaction that is leasing services. Such combined transaction has been adopted by considering the entity level TNMM as most appropriate method and the subject payment has been determined to be at arm's length in the Transfer Pricing documentation. Ld.AR also submitted that the PLI adopted by assessee is OP/OE wherein while computing the operating profits the impugned payment made to Cisco India has been considered as operating expenditure. 5.9. He thus submitted that the Ld. TPO has already considered the above expenditure towards administrative and marketing and sales support services as an operating expenses while computing the margin of assessee which is consistently accepted by the Ld. TPO in the preceding assessment years. It has been submitted by the Ld.AR that the Ld. TPO has already accepted the margin of assessee at 6.62% ....
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.... year commencing on or before 1st day of April, 2016 no disallowance, on account of any expenditure being excessive or unreasonable having regard to the fair market value shall be made in respect of a specified domestic transaction referred to in section 92BA, if such transaction is at arms length price as defined in clause (ii) of section 92F". 5.15. On combined reading of the omitted provisions and the inserted proviso to section 40A, it is amply clear that the new proviso to section 40A is a saving clause by virtue of which, any specified transaction on or before 01.04.2016 has to be tested as per the provisions of section 92C. 5.16. We therefore respectfully following the ratio laid down by Hon'ble Supreme Court in case of Kolhapur Canesugar works Ltd. and General Finance Co. vs ACIT, hold that as the transaction under consideration is prior to 1/04/2016, has to pass through the tests laid down under the Transfer Pricing provisions. Accordingly ground for raised by assessee stands dismissed. 6. Grounds 5-10: These grounds are considered together as these are 3 propositions argued by the Ld.AR. 6.1. On going through the business scenario explained by the Ld.AR, assessee p....